Nigeria is grappling with a severe economic shock as its inflation rate surged to 25.80% in August, marking the highest level since August 2005, according to data from the National Bureau of Statistics.

This inflationary trend has been steadily climbing over recent months, with May at 22.41%, June at 22.79%, July at 24.08%, and the latest peak in August.

The situation worsened after the Nigerian government removed fuel subsidies, and the Naira was allowed to float on the foreign exchange market in June.

President Bola Ahmed Tinubu, in his inaugural speech in May 2023, had announced the discontinuation of fuel subsidies, leading to a significant increase in petrol prices from N180 per liter to N600 per liter.

These policy changes were followed by forex reforms, causing the Naira’s exchange rate to plummet from N720/$1 in June, both in the parallel and official markets.

The consequence of these policies has rippled through the economy, causing food, transportation, goods, and services prices to skyrocket over the past three months.

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The Central Bank of Nigeria (CBN) attempted to counter rising inflation by tightening monetary policies in July, increasing the interest rate to 18.75% from 18.50%. However, this measure hasn’t yielded the desired results.

Economic experts believe that stabilizing the forex market is crucial to curbing inflation. The recent appointment of Olayemi Cardoso as the Governor of the CBN has sparked optimism about potential changes.

Dr. Ayo Teriba, CEO of Economic Associates, emphasized that Nigeria’s inflation woes are not solely the CBN’s problem but a broader macroeconomic challenge. He pointed out that unless exchange rate instability is addressed, inflation will remain high.

Prof. Godwin Oyedokun, an accounting and financial development expert at Lead City University, echoed the sentiment that tightening monetary policy alone might not be effective.

He suggested a thorough review of past policies and a more comprehensive approach to tackle inflation.

Idakolo Gbolade, CEO of SD & D Capital Management, emphasized the importance of proper implementation of fiscal policies and synergy between the government and the CBN.

He also called for measures to reduce the gap between the official and black market exchange rates and the effective use of recovered funds for agricultural policies to combat food inflation.